Affinity offers for life insurance are when a life insurance provider offers cheap insurance to members of an affinity group. This may be a trade union, a professional association, or even a church or sports association.
The logic behind an affinity offer is twofold. Firstly, life insurance works on the principle that it ties people together by groups or pools. Although predicting whether something bad will happen to a specific individual is hard or impossible, looking across a group changes this. Within a pool, it’s easy to calculate from past results what future results will be, unless there are sudden and dramatic changes within the pool’s makeup. In short, uncertainty with an individual becomes certainty across a group.
This certainty is used by the life insurance company to calculate policy premiums based upon easily-available information. For this reason many, although not all, affinity programs do not need the medical examinations or in-depth questionnaires required for individual policies, which group people into similar risk profiles. With affinity groups, much of this sorting has already been done, keeping prices down.
Another reason affinity insurance is often cheaper is the reduced cost of marketing. Many affinity groups offer a mailing list as well as a trusted name, which increases the take-up. In some cases, the offers are mailed out with the regular membership information packets. This drastically reduces the cost of marketing for the life insurance company. Some of this cost saving is passed on to the union, professional association, or other group, and some is passed on to the policy holder.
Affinity insurance tends to be somewhat limited when compared to many individual insurance offers, although there do tend to be more choices than with employer provided insurance, because the insurance is run through groups.
In some cases providers of other types of insurance, such as professional indemnity or health insurance, can also be bundled with the life insurance in the affinity offer, although this practice is still rare.
Some life insurance providers only work through affinity offers and will not accept individual applicants. This can be a problem when a person leaves a group or retires from a union, although there’s sometimes a facility to purchase subsequent insurance for existing customers.